MADISON, Wis.-One new analysis of the economy that lies ahead sums up the "good news" this way: "the U.S. economy will limp along for the next several quarters."
CUNA Mutual's newest Trends Report shares a more sobering finding--that "double-dip recession probabilities are on the rise, now approaching 50%."
"In my presentations and discussions with CU leaders across the U.S., representing 19 different states, 98% feel we never exited the previous recession," said CUNA Mutual's Chief Economist, Dave Colby. "This percentage has deteriorated since February and is more optimistic than what members believe."
As a result, said Colby, "With all of the global economic uncertainty, the likelihood of an overly dynamic regulatory environment and rising political rhetoric/gamesmanship, the only constant for CUs is helping members with their financial security. Helping those members nearing retirement reduce liabilities is a better strategy than growing assets. Helping struggling member households improve cash-flow with lower interest rates can make a big difference. These are just two opportunities we can tap."
According to CUNA Mutual, data shows:
• Mid-year data revisions reduced previous loan estimates by $0.3 billion, but growth trends were not impacted. Despite an extremely challenging lending environment, total loans increased in each month since March. At $581 billion, the industry loan portfolio is up 1.3% since March, but remains down 0.3% during the past year.
CUNA Mutual noted that during the previous two recessions CU loan portfolio growth remained positive. Currently, interest rate risk avoidance strategies and the lack of consumer loan demand (other than used vehicle and credit cards) have generated year-over-year portfolio contraction for 19 consecutive months. Since its peak in October 2009, the CU loan portfolio is down 1.6% ($9.3 billion), even with a $4.5-billion (13.1%) increase in member business loans.
• Despite positive revisions in credit cards and unsecured loans, consumer installment credit (CIC) at CUs was revised lower by 0.2 percentage points. At $225 billion, CUCIC is down 0.7% ($1.5 billion) since August 2010.
• Credit cards (16.2% of CUCIC and 6.3% of total loans) are up 2.0% year-over-year, but remain 0.7% below their seasonal peak in December. The CU share of this $793-billion lending arena is now 4.6%, up 0.2 percentage points over the past year.
• The CU share of the total CIC market ($2.5 trillion) slipped to 9.2%, but this is primarily due to the tremendous growth surge in government student loans (54.7% or $139 billion year-over-year gain) in the broader market.
• CUs have expanded their used vehicle loan portfolio 3.7% YTD and 4.3% since August 2010. At $107 billion, used vehicle loans represent 64% of total vehicle loans. "Our outlook for vehicle loan growth remains muted well into 2013," CUNA Mutual said. "Continued year-over-year contraction is more likely in the near-term."
• At $317 billion, total RE loans are down 0.3% over the past year. At the end of August, RE loans equaled 55% of all CU loans and roughly 33% of total assets.
• Given the extremely weak economic outlook, CUNA Mutual is projecting 30-year fixed-rate mortgage interest rates will remain in the 3.9-4.3% range for the near term.
• Total savings are up 4.0% over the past year, well below the 7.6% annual average growth rate of the last 10 year
• At the end of August, total CU capital reached $99.4 billion, up 6.7% YTD.
